Boral — Investor Day (June 2014)
51 slides from Boral's investor day presentation, Jun 2, 2014
Slide 1: USG Boral Building Products Analyst and Investor Tour
USG Boral Building Products Analyst and Investor Tour Indonesia | China - 2 & 4 June 2014 Introduction by Mike Kane Boral Gypsum – now a part of the USG Boral JV – is integral to Boral’s long term growth aspirations 1H FY20141 Revenue (pre-JV formation) Boral Group • Targeting 15% ROFE2 through cycl
Slide 2: Combined volumes across Asia and Australia growing at 6% CAGR
Combined volumes across Asia and Australia have been growing at CAGR of 6% p.a. FY12 – Plasterboard sales volume3 A$m FY13 1H FY14 m m2 proforma1 Revenue 911 919 537 391 378 359 EBITDA 126 125 77 325 308 EBIT 88 83 55 292 281 EBIT margin (%) 9.7% 9.0% 10.2% 217 200 Revenue by country2 Other, 11% Ind
Slide 3: Growth underpinned by product penetration opportunities
Growth is also underpinned by product penetration opportunities Early Stage Growth Developed Matured Market growth led by residential ceiling and Early Stage Market led by wall penetration Market matured commercial projects Driven by commercial buildings Market size Driven by residential buildings 1
Slide 4: Analyst and Investor Tour Agenda
Analyst and Investor Tour Indonesia China 2 - 4 June 2014 Agenda DAY 1 – Indonesia 1. USG BORAL OVERVIEW FREDERIC DE ROUGEMONT 2. Sales & Marketing Bill Hogan 3. Asia Pacific Tony Charnock 4. Indonesia Yan Xu 5. Cilegon Plant Yan Xu DAY 3 − China 6. Technology & Manufacturing Joe Holmes 7. Asia / Mi
Slide 5: Overview: The Opportunity
Overview The Opportunity • Build on our industrial platform as market leader and driver of innovation in building products and systems • Leverage USG Boral partnership to achieve strong revenue and earnings growth – Technology – Enhanced product platform – New strategic assets (gypsum, acoustic ceil
Slide 6: Extensive infrastructure generating ~US$1bn p.a. in revenue
Overview Extensive infrastructure generating ~US$1bn p.a. in revenue Metal Mineral fibre Joint Plasterboard Compound Gypsum Other products ceiling tile/grid Capacity Board Ceiling Plants Plants Plants Mine Plants (m m2) lines lines Total 633 25 6 12 3 12 3 3 Australia 86 3 13 1 16 2 cornice New Z’la
Slide 7: Business Priorities / Challenges
Overview Business Priorities / Challenges 1. Revenue growth 3. Manage costs • Price premium for advanced • Deliver manufacturing and technology transport synergies • New adjacent products • Optimise the organisation • Accelerate penetration of our • Procurement solutions To • Operations optimisation
Slide 8: Mobilisation and Manage costs
Overview 2. Mobilisation Executive team changes – completed Integration of Marketing/ operations branding strategy Deliver on NextGen roll out & synergies Sales & Technical & IP marketing training training Employee engagement 9 Overview 3. Manage costs In addition to delivering cost synergies, comme
Slide 9: Optimise capacity
Overview 4. Optimise capacity • Margins and earnings to benefit as USG Boral plasterboard capacity recent capacity expansions are fully utilisation & sales volume leveraged Sales volume2 Capacity at year end • Capacity expanded by 277m m2 since 700 Capacity utilisation (RHS) 80% FY2007 supporting sa
Slide 10: Delivering customers an enhanced product portfolio
Supplementary Information 13 Overview Delivering customers an enhanced product portfolio Manufacturing Product Description Application locations Standard & Plasterboard Internal walling/ ceiling Refer slide 5 Technical board Boral manuf. to include USG IP Plasterboard ceiling Plasterboard Ceilings R
Slide 11: Boral USG end market revenue exposure in key countries
Overview Boral USG end market revenue exposure in key countries1,2 Project Retail Korea Thailand 57% 30% Australia Non-residential, Detached 70% 22% dwellings, 40% 43% Indonesia China Alterations & Additions, 22% Multi- 28% 45% residential,16% 55% 72% 1. Australia end-market exposure based on revenu
Slide 12: USG Boral - Sales & Marketing
17 Sales & Marketing USG Boral - Sales & Marketing • We have a Plan to Win • Revenue growth from NextGen technologies accounts for nearly 50% of synergy attainment – Our marketing strategies – brand, portfolio and pricing – are key elements of our Plan to Win • Adjacent products account for 25-30% o
Slide 13: Our Plan to Win; Brand Strategy
Sales & Marketing Our Plan to Win Growth Sales Excellence Architectural Sales Category Management NextGen Technology Brand Strategy 19 Sales & Marketing Brand Strategy Corporate brand Product descriptor Product brand Product descriptor Product brand 20
Slide 14: NextGen market research scope; Unlocking our full potential
Sales & Marketing “NextGen” market research scope • Attractiveness of attributes – Positioning • Willingness to pay a premium – By market, segment, customer type • Approach – 2,000 interviews; 14 markets; 3 customer types Outcome informs strategy: Market, Pricing, Capital Expenditure 21 Sales & Mark
Slide 15: Category Management; Architectural Sales
Sales & Marketing Category Management • Mineral Fibre Ceilings • Performance Substrates • Join Compound and Accessories • Plasterboard 23 Sales & Marketing Architectural Sales Source: USG Corporation 24
Slide 16: Architectural Sales creates power
Sales & Marketing Architectural Sales creates power Prior State Future State Limited Strong Spec Spec position Position Lower Higher Margin Price is Margin Price is #1 Product Secondary Product Mix Mix Limited Open Select Contractor Dealer Contractor Dealer Loyalty Network Loyalty Network 25 Sales &
Slide 17: Sales Excellence; Focused Agenda
Sales & Marketing Sales Excellence 1. Pricing management Choice Core Customers Customers 2. Sales force High Profitability management High Profitability No Relationship Sustained Relationships Low Cost to Serve Low Cost to Serve Low Volume High Volume 3. Organisation design and execution Low Profita
Slide 18: USG Boral manufacturing footprint (Asia Pacific)
Agenda DAY 1 − Indonesia 1. USG Boral Overview 2. Sales & Marketing 3. ASIA PACIFIC – TONY CHARNOCK 4. Indonesia 5. Cilegon Plant DAY 3 − China 6. Technology & Manufacturing 7. Asia / Middle East 8. China 9. Star-USG JV & Ceiling Tile Plant 29 Asia Pacific USG Boral manufacturing footprint AU, IND,
Slide 19: Plasterboard demand in Asia Pacific – penetration upside
Asia Pacific Leveraging combined product offering (including JV businesses) Current product offering Future product offering New Product Australia Zealand Indonesia Philippines Malaysia Singapore Standard & Technical board Boral Cornice manuf. to include Plasterboard ceiling tile USG IP Joint compou
Slide 20: Singapore penetration success; Australia market dynamics
Asia Pacific Singapore penetration success • Residential wall penetration ~50% of dry Sengkang – Compassvale Mast (public housing pilot project – HDB) area partitions in private residential projects; no penetration in public housing • In March 2014, Government announced mandate to convert all dry ar
Slide 21: Malaysia/Singapore, Philippines & NZ: Market dynamics
Asia Pacific Malaysia/Singapore, Philippines & NZ: Market dynamics & opportunities Malaysia/ Singapore Philippines New Zealand • MAL: #1 in PB1 & MF1 • #1 or #2 in joint USG Boral ceiling tiles compound, MF ceiling tile • #1 in PB, PB ceiling tiles & Market • #2 in joint compound; key & grid, metal
Slide 22: Asia: Channel to Market
Supplementary Information 37 Asia Pacific Asia: Channel to Market USG Boral Large Project Smaller Project Sales Plasterboard & Retail Sales Distributors Sub-distributors LARGE INSTALLERS SMALL INSTALLERS (repairs + small / medium projects) Developers & Building Owners End Residential Residential Com
Slide 23: Australia: Channel to Market
Asia Pacific Australia: Channel to Market Gypsum Gypsum Resources Australia (GRA) Imports/Others Manufacturers USG Boral CSR Knauf BGC Distributors Company owned stores Independently-owned Hardware stores (USG Boral, CSR only) stores Company contracting offer Installers Independently-owned contracto
Slide 24: Indonesia footprint and competitive landscape
Indonesia USG Boral manufacturing footprint • ~320 employees Kalimantan Sulawesi Sumatera East Indonesia Jakarta Surabaya Java Sunter Gresik Cilegon Plant Plant Plant Capacity Plasterboard plant Plant name Gypsum type m m2 Plasterboard ceiling plant Cilegon 1 & 2 Natural Gypsum 51 Metal products pla
Slide 25: High plasterboard growth; Cilegon expansion
Indonesia High plasterboard growth Supported by economic growth & product penetration • Average GDP growth over 6 yrs to Indonesia plasterboard market size3 m m2 CY2013 of ~6%1 • Fast growing middle class and 120 CAGR of 16% since FY2009 decreased dependency ratio driving increased residential deman
Slide 26: Substantial distribution network; Cost and price management
Indonesia Substantial distribution network Supporting Retail & Project markets 62 exclusive distributors across Indonesia Pakubuwono Signature Project • 107,000m2 of plasterboard supplied Number of distributors in 2014 • Plasterboard system both for ceiling 1 1 & partition 2 Kalimantan 1 2 Sulawesi
Slide 27: Indonesia Priorities
Indonesia Priorities • Revenue growth – Solidify #1 market position in board – Continue developing drywall partition market – Strengthen market position in MF ceiling tiles and joint compound – Develop Fiberock® and Securock® market – Strengthen specification capabilities & value offer through direc
Slide 28: Jayaboard – Top of Mind brand
Indonesia Jayaboard – “Top of Mind” brand USG Boral plasterboard brand, Jayaboard, voted preferred brand Top Brand award 2011, 2012 (One of the most popular brands across all industries) iDEA RUMAH award 2009, 2010, 2011, 2013, 2014 (Most popular brand in Plasterboard industry) Architect Choice awar
Slide 29: Cilegon Plant Overview; Products manufactured
Cilegon Plant Overview Background Key facts • 1997 − 1998: Construction • Two plasterboard lines – 2nd hand plant from France − Line 1: 21m m2 • 2004: Compound plant upgraded − Line 2: 30m m2 • 2013: 2nd plasterboard line expansion • Total investment in line 2 of ~US$22m • Two compound/plaster lines
Slide 30: Cilegon Plant production volume and performance
Cilegon Plant Production volume Plasterboard production volume Compound/Plaster production volume m m2 K tonne FY09 FY10 FY11 FY12 FY13 FY14F FY09 FY10 FY11 FY12 FY13 FY14F 53 Cilegon Plant Performance Cilegon line 1 Cilegon line 2 Line speed 70 50 30 Introduction of Lean Manufacturing Overall Equip
Slide 31: Cilegon Plant Layout
Cilegon Plant Plant Layout Total area: 90,000 m2 Loading 2 Line 2 Office 2 Gypsum storage Mill 2 Mill 1 Compound Line 1 Loading 1 Office 1 55 Agenda DAY 1 – Indonesia 1. USG Boral Overview 2. Sales & Marketing 3. Asia Pacific 4. Indonesia 5. Cilegon Plant DAY 3 – China 6. TECHNOLOGY & MANUFACTURING
Slide 32: USG NextGen technology; deployment team
Tech & Manuf. USG NextGen technology – delivering superior quality differentiation NextGen technology What it delivers • Proprietary raw materials • Superior sag performance with • Proprietary equipment delivery improved score and snap systems • Improved weight to strength ratio • Building block pro
Slide 33: NextGen plasterboard delivered to markets by end of CY2014
Tech & Manuf. NextGen plasterboard will start to be delivered to markets by the end of CY2014 US$50m capital rollout program Wave 1: • Launch in initial markets − Australia, Korea, Indonesia, Thailand, Export Markets Wave 2: • Fill the market gaps – − Australia, China, Vietnam • Improve product qual
Slide 34: Lightweight process requirements facilitate cost reduction
Tech & Manuf. Lightweight process requirements facilitate cost reduction Requirement Description Comments 1 • Minimise feed rate variation • Control stucco & additive quality Establish • Implement robust process process controls foundation • Steady state operations • Train operators equal lower cost
Slide 35: Training; Protecting our Intellectual Property
Tech & Manuf. Training for improved manufacturing operations • Safety training at company-wide plant manager meeting, May-14 • USG Boral Fundamentals of Plasterboard Training, March-14 − Manufacturing and process teams − Training on NextGen technology, raw materials, process improvements, best pract
Slide 36: USG Boral manufacturing footprint (Asia / Middle East)
Agenda DAY 1 – Indonesia 1. USG Boral Overview 2. Sales & Marketing 3. Asia Pacific 4. Indonesia 5. Cilegon plasterboard plant DAY 3 – China 6. Technology & Manufacturing 7. ASIA / MIDDLE EAST – DAN CASEY 8. China 9. Star-USG JV & Ceiling Tile Plant 65 Asia / Middle East USG Boral manufacturing foot
Slide 37: Leveraging combined product offering
Asia / Middle East Leveraging combined product offering (including JV businesses) Current product offering Future product offering Thailand Vietnam Export/ Saudi/ Korea China other India UAE Product Boral manuf. to Standard & Technical board incorporate USG IP Plasterboard ceiling tile Joint compoun
Slide 38: Plasterboard demand growth and penetration upside
Asia / Middle East Unique benefits of plasterboard lining systems driving adoption Environmental benefits Low embodied and lifecycle energy Recyclable Can be manufactured from recycled inputs Flexibility and Performance Ease of reconfiguration and repair Job site cleanliness & safety Des
Slide 39: Thailand, Vietnam, India and UAE market dynamics
Asia / Middle East Korea Thailand: Market dynamics & opportunities Key Competitors • USG Boral #1 market share in plasterboard (PB), joint compound, PB ceiling tile & • Major competitor in PB, compound & metal products St metal products Gobain • Recent political unrest has dampened • Small position
Slide 40: Ho Chi Minh plant upgrade; Middle East JV
Asia / Middle East Ho Chi Minh plant upgrade will support domestic and export growth • Plasterboard capacity expansion of 30m m2 ramping up – Delivers lower cost modern equipment platform to leverage USG technologies – Expect cost benefits through board line efficiency improvements and improved stuc
Slide 41: Asia / Middle East Priorities
Asia / Middle East Priorities • Revenue Growth: Continuous penetration drive – Through sales excellence and creative product /system solutions – Deliver USG technology rollouts (NextGen and joint compound) and develop adjacent product businesses • Cost improvement: Lower the break-even for all busin
Slide 42: Korea and Thailand manufacturing footprint
Asia / Middle East Korea manufacturing footprint ~45% of population live in Seoul metropolitan area which accounts for ~45% of PB sales Dangjin Plant Plasterboard Capacity m m2 Seoul Dang-jin 1& 2 72 Kyung-gi Ulsan 46 • Target area: Seoul, Kyung-gi Yeo-su 35 • Line 1 opened 2002 • Line 2 opened 2009
Slide 43: Agenda
Agenda DAY 1 – Indonesia 1. USG Boral Overview 2. Sales & Marketing 3. Asia Pacific 4. Indonesia 5. Cilegon plasterboard plant DAY 3 – China 6. Technology & Manufacturing 7. Asia / Middle East 8. CHINA – GAVIN BURTON 9. Star-USG JV & Ceiling Tile Plant 79 80
Slide 44: China footprint; leading positions in key regional areas
China USG Boral manufacturing footprint Capacity Plasterboard plants Gypsum Type m m2 Pudong (Shanghai) Synthetic 30 Chengdu Synthetic 12 Heilongjiang Chongqing 2 Synthetic 13 Chongqing 3/4 Synthetic 30 Jilin Baoshan (Shanghai) Synthetic 35 Liaoning Shandong Natural/Synthetic 35 Xinjiang Inner Mongo
Slide 45: High plasterboard market growth in China
China High plasterboard market growth Total China PB market size, m m2 • Plasterboard penetration 2008 - 2013: CAGR of 14% – for China is 1.4m2 p.a./capita 2,050 – for Shanghai is 3.2m2 p.a./capita 1,850 1700 1,480 – Beijing is 2.8m2 p.a./capita 1,260 1,060 • Overall penetration remains well below d
Slide 46: Capacity available to meet growth; profitability recovering
China Capacity available to meet growth Current capacity utilisation at ~65% USG Boral plasterboard sales volume in China m m2 Chongqing 4 Chongqing 3 2000- 2013 CAGR: 15% Shandong North Baoshan West Chengdu Chongqing 2 Chongqing 1 East CY 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 47: Managing costs – Reducing breakeven
China Managing costs – Reducing breakeven Break-even volume for USG Boral China We have reduced break-even point by 18% since Nov-13 Sales volumes to break-even, Km2 -18% Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 • Continuous process improvement (energy, paper weight, board weight, lean (OEE)) • Hea
Slide 48: China overview of manufacturing plants
Supplementary Information 89 China Overview of manufacturing plants Key fact Core markets Served population • Shanghai PUDONG • Opened in 1998 • Zhejiang 150m SHANGHAI • 30m m2 capacity • Jiangsu EAST • Shanghai BAOSHAN • Opened in 2010 • Zhejiang 150m SHANGHAI • 35m m2 capacity • Jiangsu • Opened i
Slide 49: Selling systems and solutions driving metal business growth
China Selling systems and solutions delivering high growth in metal business Metal contribution growth FY08 - FY14F CAGR: 36% FY08 FY09 FY10 FY11 FY12 FY13 FY14F Market characteristics • Highly fragmented (BNBM is the market leader with 7% share) • Short delivery lead time requirement Strategy • Pro
Slide 50: Star-USG JV Overview
Star-USG JV Star-USG JV Overview • Star-USG JV established Nov-07 • BBMG Group (Global Fortune 500 in 50% 50% China) has operational control Star-USG JV • Large mineral fibre ceiling tile manufacturing base in China Star-USG Building Materials Co Ltd – Plus 5 lines manufacturing metal grid – Plant c
Slide 51: Star-USG product range and ceiling tile position
Star-USG JV Full product range, focusing on innovation for high-end specifications Mineral fibre Plant area covers 50,000 m2 ceiling tile Mineral wool Metal grid 95 Star-USG JV #2 ceiling tile position in high- & mid-end of China ceiling tile market Indicative price Approximate share of total points